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Don’t Buy the Myth that Every Startup Needs a Co-Founder

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Common wisdom suggests that when it comes to launching a startup, you need co-founders. But a new study finds that solo founders can in fact be successful — if they have the support of co-creators. Co-creators are individuals or organizations that play a critical role in helping a founder build their business, but without receiving the control or equity of a formal co-founder. Based on more than 100 interviews with solo founders, the authors describe three common types of co-creators: employees, alliances, and benefactors. Of course, working with a co-founder can be the right decision in some cases. But the research illustrates how co-creators can provide many of the same key resources, connections, and ideas as a co-founder might offer, with a lot less risk.

One of the earliest and most important decisions that startup founders face is whether to go it alone or find a co-founder. Many industry veterans argue that being a solo founder is a recipe for disaster, and some venture capital firms and incubators even explicitly recommend against funding solo founders. But are co-founders really the only path to entrepreneurial success?

There is plenty of data illustrating the benefits of working with a founding team. One report found that 80% of all billion-dollar companies launched since 2005 have had two or more founders — but of course, that means that a not-insignificant 20% of these successful firms were founded by just one founder. Google, Facebook, Airbnb, and countless other well-known companies were started by teams — but Amazon, Dell, eBay, Tumblr, and many others have achieved massive success with a solo founder. In our recent research, we explored the factors that enable solo-founded companies like these to succeed, and we discovered a critical nuance: Most successful “solo” founders are not actually solo.

Through a series of in-depth interviews as well as an analysis of quantitative data from more than 100 solo founders, we found that while these individuals didn’t have co-founders with equity and voting rights, they did have co-creators. Our study illustrated how individuals and organizations who aren’t official co-founders can still play a critical role in helping founders build their businesses (without forcing them to give up equity or risk co-founder drama). Specifically, we identified three common types of co-creators that can provide substantial support to solo founders:

Employees

For founders who already have some funding (from savings, a prior exit, etc.), it can often make sense for early employees to serve as co-creators. While these employees will typically expect some equity, the ability to pay a cash salary will enable founders to get access to the talent they need to start their business without giving up substantial equity stake (not to mention risking the tension and conflict that can sometimes come along with co-founders). For example, we interviewed one solo founder who had just sold another company for a modest payout. With his earnings from that exit, he was able to hire employees for his next venture rather than relying on co-founders who would work for equity without salary.

Similarly, while eBay founder Pierre Omidyar is generally credited with being a solo founder, he launched the company with the benefit of a $1 million payout after selling another business to Microsoft. Those funds enabled him to hire Chris Agarpao and Jeff Skroll early on, both of whom played instrumental roles in the company’s success. Likewise, while many know Eric Yuan as the solo founder of Zoom, he in fact founded the company alongside 40 engineers who followed him from WebEx.

Alliances

Of course, not every founder is able to hire employees right away. If paid support isn’t an option, founders can form win-win alliances with existing organizations. For instance, we spoke with the founder of an EdTech startup who had a strong technical background, but zero sales experience or connections to the school districts that were his target customers. He considered bringing on a co-founder to fill these gaps, but instead, he identified another firm that was already selling a portfolio of related products to multiple school districts. He arranged an alliance in which he gave the partner firm a cut of the profits in exchange for their support marketing his product to their existing customer base. This alliance gave the founder access to the sales and marketing resources he lacked on his own, without diluting his equity.

Other examples abound. Consider Sara Blakely, the founder of Spanx, which sells shapewear in more than 50 countries. Her idea might have never become a billion-dollar business if Sam Kaplan, the owner of the established manufacturing company Highland Mills, had not taken a chance on her and agreed to manufacture her product. With the help of alliances like this, Blakely was able to retain 100% ownership of Spanx while leading its meteoric rise.

Benefactors

Finally, many of the founders we talked to relied strongly on benefactors: individuals or organizations who provided these entrepreneurs with connections, money, and/or advice without any expectation of reciprocation or compensation. For example, one founder we talked to had limited resources and needed a lot of expensive equipment to start his company. At first, he assumed he would need to find a deep-pocketed co-founder or investor — but then he realized that a close friend of his owned a small business with the necessary equipment. This friend let the founder use the equipment, and even asked his own employees to help the founder out, all free of charge. The arrangement continued until the founder earned enough revenue to make his own hires and purchase his own equipment.

To be sure, not all of us have such generous friends. But there is actually a long history of benefactors supporting the ambitions of solo founders. Henry Ford, for example, convinced several friends (including blacksmiths, engineers, and even his boss at the time, Thomas Edison) to donate their time, expertise, and resources to help him build his first prototype models. Similarly, Mint’s rapid early growth was substantially bolstered by solo founder Aaron Patzer’s ability to convince many well-known personal finance bloggers to advertise his company on their blogs for free.

***

Early employees, alliances, and benefactors may not receive the same recognition as founders — but these co-creators can play a central role in the early growth of a company. Consider the history one of the world’s most valuable brands, Amazon.com. Yes, Jeff Bezos is the firm’s “solo” founder. But no, he did not build the company alone. He had several co-creators, including early employees such as Paul Davis, who oversaw the back-end development for Amazon.com and was “intimately involved with many aspects of getting [the] company started;” Tom Schonhoff, who built Amazon’s entire customer service department from the ground up; and Shel Kaphan, who Bezos has described as “the most important person ever in the history of Amazon.com.”

Co-creators like these can provide many of the same key resources, connections, and ideas as a formal co-founder might offer, without requiring the founder to give up control or deal with co-founder tensions. This can be a significant advantage — after all, it’s a lot easier to say goodbye to an unhappy co-creator with no ownership than to an unhappy co-owner with lots of it. For example, Mark Zuckerberg’s split from co-founder Eduardo Saverin led to a massive and messy lawsuit that ended with a multi-billion-dollar settlement for Saverin. And situations like these are more common than one might think, with a recent survey finding that 43% of company founders are forced to buy out their co-founders due to rifts and power struggles. Of course, co-founders can add a lot of value, and sometimes they’re definitely the best option — but they’re not the only way for entrepreneurs to get the support they need. With the right co-creators in their corner, a “solo” founder can go a long way.

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4 Tips for Starting an Industrial Business

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The industrial sector is a broad category that covers businesses involved in the manufacturing, production, and distribution of goods. Small industrial companies are growing across the country and there are many opportunities for entrepreneurs to get involved in this sector.

As with any type of business, there are certain things you need to do to set yourself up for success. Here are four tips for starting an industrial business:

photo credit: Pixabay

1. Do Your Research

Market research means figuring out who your target customers are and what they want or need. There are a number of different ways to do this, but some of the most common include surveys, interviews, focus groups, and observation.

Surveys can give you a good overview of customer opinions while interviews or focus groups can help you to delve deeper into specific issues. Observing potential customers in their natural environment can also be helpful in understanding their behavior and needs.

2. Choose the Right Niche

When it comes to starting an industrial business, one of the most important decisions you’ll make is choosing the right niche. There are a number of factors to consider when making this choice, and it’s important to do your research before settling on a particular industry.

First, you’ll need to identify the needs of your potential customer base, such as the products or services they need. Once you have a good understanding of the market, you can then start to narrow down your options. Consider the competition in each niche and decide which one offers the best opportunity for success. When making your final decision, it’s essential to choose a niche that you’re passionate about.

3. Create a Business Plan

In today’s competitive marketplace, it’s more important than ever to choose the right niche for your industrial business. When you specialize in a specific industry or type of product, you can better meet the needs of your target market and stand out from the competition. How do you know what niche is right for your business? Here are a few things to consider:

First, think about your strengths. What does your company do better than anyone else? What unique skills or experience do you bring to the table? Use these strengths to narrow down your focus and choose a niche that you’re passionate about.

Next, consider your target market. Who are you trying to reach with your products or services? What needs do they have that you can address? When you choose a target market and understand their needs, you’ll be better able to choose a niche that meets their demands.

Finally, don’t be afraid to experiment. Trying new things is essential for any business, so don’t be afraid to test out different niches to see what works best for you. By keeping these tips in mind, you can be sure to choose the right niche for your industrial business.

Engineers work with industrial printer

4. Optimize Your Processes

Through industrial control engineering, you will be able to identify opportunities for improvement and design solutions that achieve the desired results. In many cases, these solutions involve the use of automation and other advanced technologies.

By optimizing industrial business processes, industrial control engineers can help to improve efficiency and increase productivity. In addition, they can also help to improve safety conditions by reducing the potential for accidents. As industries continue to grow and become more complex, the demand for qualified industrial control engineers is likely to increase.

Endnote

With an increased demand for industrial operations and manufacturing, there has never been a better time to start an industrial business. By following these four tips, you can be sure to set your business up for success.

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How to Find the Right Business Coach — and Avoid the Wrong One

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At its best, business coaching can connect you with a mentor and supporter who helps you generate ideas, make plans and execute on them.

But at its worst, a business coaching offer can cost you time, energy and money — without much to show for it.

Here’s what to expect from a business coach, how to find a coach that suits you and how to spot red flags.

What a business coach can do

Business coaches draw on their professional experience to help you set and achieve your own business goals.

“I’m here to help you, and I’m here to raise your level of knowledge in whatever way I can,” says Gary Robinson, who chairs the Memphis, Tennessee, chapter of SCORE. SCORE offers free business mentoring for entrepreneurs nationwide.

Some ways a business coach or mentor might do this include:

  • Offering feedback on your ideas and suggesting new ones.

  • Giving you templates and other tools that help you make plans.

  • Connecting you with resources in your region or your industry.

  • Giving you deadlines and holding you accountable to them.

Some business coaches may also offer coursework or group training sessions on particular topics, like sales.

Working with a coach should help you identify opportunities you hadn’t seen before or develop new strategies for pursuing those opportunities, says Sophia Sunwoo, who coaches women and nonbinary entrepreneurs through Ascent Strategy, her New York City-based firm.

“[Coaches] don’t necessarily have to have all the answers,” Sunwoo says. “But they are the people that know how to maneuver and create a bunch of different thinking paths for their clients.”

What a business coach can’t do

A business coach isn’t the same as a consultant, whom you would hire to perform a specific task. A coach or mentor could look over your business plan, for example, but they wouldn’t write it for you.

“If you were to hire me as a consultant, you would expect me to roll up my sleeves and pitch in and work with you to get things done, and you would pay me for that,” Robinson says. Coaches, on the other hand, “try to show you how to do things so that you can do them [yourself].”

Business coaches are also not therapists, Sunwoo says. Entrepreneurship can be emotionally and mentally taxing, but it’s important that coaches refer clients to mental health professionals when necessary.

Business coaching red flags

If a business coaching opportunity “promises guaranteed income, large returns, or a ‘proven system,’ it’s likely a scam,” the Federal Trade Commission warned in a December 2020 notice.

In 2018, the FTC took legal action against My Online Business Education and Digital Altitude, which purported to help entrepreneurs start online businesses. The FTC alleged these companies charged participants more and more money to work through their programs, with few customers earning the promised returns.

In both cases, these operations paid settlements, and the FTC issued refunds to tens of thousands of their customers in 2021 and 2022.

To avoid offers like these, the FTC recommends that you:

  • Be wary of anyone who tries to upsell you right away or pressures you to make a quick decision.

  • Search for reviews of the person or organization online.

  • Research your coach’s background to see if they’ve accomplished as much as they say.

Sunwoo says to also be skeptical of one-size-fits-all solutions. A coach should customize their advice to your personality and skill set, not ask you to conform to theirs.

“The moment that a business coach pushes you to do something that is really not compatible with your personality or your beliefs or values,” Sunwoo says, “that’s a huge problem.”

How to find the right coach — maybe for free

Here’s how to find a coach that will be as helpful as possible.

Determine whether you need advice or to hire someone. A coach isn’t the right fit for every business owner. If you need hands-on help organizing your business finances, for instance, you may need a bookkeeping service or accountant. And take legal questions to an attorney.

Seek out the right expertise. A good coach should be aware of what they don’t know. If they’re not a good fit for your needs — whether that’s expertise in a particular industry or a specialized skill set, like marketing — they might be able to refer you to someone who’s a better fit.

Consider free options. There may be some in your city or region:

  • SCORE offers free in-person and virtual mentoring in all 50 states, plus Guam, Puerto Rico and other U.S. territories.

  • See if your city has a Small Business Development Center, Veterans Business Outreach Center or a Women’s Business Center. All are funded by the U.S. Small Business Administration and offer free training and advising for entrepreneurs.

  • Do an online search for city- or state-specific programs. Philadelphia, for example, offers a business coaching program designed for entrepreneurs who want to qualify for particular business loan programs. Business incubators often offer courses or coaching.

Make sure your coach is invested in you. They should take the time to learn about you, your business and its unique needs, then leverage their own experiences and creativity to help you.

“I’m on your team now,” Robinson says of his clients. “Let’s do this together and make this a success.”

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Are There SBA Loans for the Self-Employed?

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Many of the same SBA loans are available to both self-employed people and more formally structured businesses, such as limited liability companies and corporations. However, self-employed individuals, like sole proprietors and independent contractors, might face a higher barrier to entry for having limited credit history, inconsistent revenue or no collateral. If they can’t qualify for an SBA loan, other business financing options are available.

Who qualifies as self-employed?

Sole proprietors, independent contractors and partnerships all fall under the self-employed category. In these cases, there is no legal distinction between the business owner and the business itself. Sole proprietors, for example, are solely responsible for their business’s gains and losses, while LLCs and corporations are legally distinct from their owners. This distinction helps protect the owners’ personal assets if their business runs into legal or financial issues.

Are self-employed SBA loans hard to get?

While a sole proprietorship is much easier to set up than an LLC or corporation, lenders may be more hesitant to finance them for a few reasons:

  • Self-employed business owners are legally responsible, as individuals, for any debt and liabilities that their businesses take on. If someone sues their business, for instance, their personal assets — not just their business — could be at stake. This makes it riskier for lenders to finance them.

  • Sole proprietorships and independent contracting businesses may have lower revenue or less collateral to offer since they’re often a business of one. This could make it more difficult for them to prove that they can pay back the loan, plus interest. And it may require more paperwork.

  • Some banks set lending minimums that surpass what a self-employed business owner is looking for, either because the business owner doesn’t need that much funding or doesn’t qualify for it.

  • Since there is no legal distinction between the self-employed business owner and their business, they may lack business credit history. To establish business credit, you’ll want to register the business, obtain an employer identification number and open a separate business bank account and credit card to keep your business and personal finances separate.

SBA loans for the self-employed

SBA microloan: Best for small loans and more lenient requirements

Applying for an SBA microloan is a great option for self-employed business owners, especially if they’ve been turned down by traditional banks and don’t need more than $50,000 in funding. In fact, the average SBA microloan is around $13,000, according to the SBA. SBA microloans are administered by nonprofit, community-based organizations that can also help train applicants in business practices and management. And because the loans are small, the application process may be easier — applicants may have limited credit history and typically don’t need as high of a credit score as they do for an SBA 7(a) loan.

SBA 7(a) small loan: May not require collateral

Funds from the SBA’s most popular 7(a) lending program can be used for a variety of business-related purposes, such as working capital or purchasing equipment. While the maximum SBA 7(a) loan amount is $5 million, SBA 7(a) small loan amounts don’t exceed $350,000. And if the 7(a) small loan is for $25,000 or less, the SBA doesn’t require lenders to take collateral.

SBA Express loan: Best for quicker application process

SBA Express loans are a type of 7(a) loan for businesses that need quick financing and no more than $500,000. The SBA responds to these loan applications within 36 hours as opposed to the standard five to 10 days, which may speed up the process for borrowers working with non-SBA-delegated lenders. Additionally, borrowers might not have to fill out as much paperwork — the SBA only requires Form 1919. Beyond that, lenders use their own forms and procedures.

SBA loan alternatives

Online lenders

Self-employed business owners turned down for SBA or traditional bank loans may be able to qualify for financing with an online lender. These lenders offer options such as term loans and lines of credit, and they often process applications faster and have more lenient requirements. However, applicants should expect to pay significantly more in interest than they would with an SBA loan.

Business credit cards

Not only can business credit cards help build your business credit history and pay for everyday business purchases, but they can also help finance larger purchases (within your approved credit limit). And if you qualify for a credit card with a 0% introductory APR offer, you’ll have multiple months to pay off the balance interest-free. Just make sure you’re able to pay off your purchase before the intro offer ends and a variable APR sets in.

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